Gold Coins - Investment scenario & questions for the experts

AskRaq

I have an old friend who is trying to set up his estate & had a bunch of Krugerands that he was considering liquidating. After researching it he came across the "Best" company for this and advised that he was informed that if he sold the gold bullion, he would have to pay taxes... BUT, if he "traded" it for pre-1933 US gold coins that he would not have to pay taxes when/if he decided to liquidate them??
I don't get this??

TomB

If your friend simply purchased the coins years ago then he should sell the K-rands locally, on the BST or on ebay and deal with any tax issues as he sees fit after speaking with his tax preparer. There is such a thing as a like-trade, but I think there are more limitations on this move than most people realize. Also, I would guess that the company that proposed the trade would stand to profit mightily from the transaction.

mhammerman

There was a thread yesterday regarding this issue. Maybe one of the contributors can point you to the thread.

RWB

Your friend should visit a good tax and estate planning professional, not some company that wants to sell him something.

AskRaq

<< <i>Your friend should visit a good tax and estate planning professional, not some company that wants to sell him something. >>




I agree.... but I can't reason with him due to his hepatic encephalopathy...

TomB

I hope he is getting proper treatment for his hepatic encephalopathy and would monitor closely his decision making process.

AskRaq

<< <i>I hope he is getting proper treatment for his hepatic encephalopathy and would monitor closely his decision making process. >>



Yes, he is.... but still. I'm his health care surrogate & durable power of attorney.... but being 90 minutes away, I can't stop him from making his own choices. I just wondered if the above scenario sounded possible? It doesn't seem to make much sense to me??

timcoin

The person who gave your friend this advice was partially correct, but not completely.

The fact is, if your friend were to sell 25 or more Krugerands, the firm he sold to would be obligated to issue a 1099b form for that person at the end of the year, in the same way your stock broker does if you sell any stock. The firm would not be obligated to do so if your friend sold U.S. gold coins. However, the fact that the firm does not issue a 1099 form for purchases of U.S. gold does not exempt your friend from having to pay CG taxes if he made a profit on those coins. Likewise, if he took a loss, he could claim that loss regardless of a 1099b form being issued or not.

Unlike certain Federal, state, and local bonds, the sale of any type of coin, regardless of its form, is subject to CG tax.

It sounds like the company advising your friend was interested in making money on both ends of the deal. The best advice you could give him is that he never call them back and to sell a few Krugerands here and a few Krugerands there if he does not want a 1099b form to be issued. Still though, he is obligated to pay CG tax if he made a profit.

Edited to add: One point I forgot to mention is that if there is sales tax in your state, you can avoid paying sales tax by making a trade. If your original post was about avoiding sales tax, then yes, a trade would accomplish that. However, that trade would likely decrease the value of his estate as the company dealing with him would need to take a cut.

roadrunner

A bullion transaction like this would probably not quality for a like-kind exchange (ie defered taxes). Bullion = cash. Whatever amount the bullion had increased buy would have to be factored into the cost of the new coins.

As TomB says there are additional restrictions on what can qualify for a L-K-E. Suffice to say this probably doesn't qualify. The govt expects to be paid taxes on sales paid for in cash (or cash equivalents). Imagine someone who had bought bullion 50 years ago
for $50/oz. Today they use those coins to trade for say a MS65 Bust dollar worth $100K+. To suggest that there are no taxes due on this until the guy sells the bust dollar someday sounds absurd. And then if he trades the bust dollar for bullion 10 years down the road, he's probably gonna think taxes aren't due even if the bust dollar appreciated 100% in price.

roadrunner

timcoin

<< <i>A bullion transaction like this would probably not quality for a like-kind exchange (ie defered taxes). Bullion = cash. Whatever amount the bullion had increased buy would have to be factored into the cost of the new coins.

As TomB says there are additional restrictions on what can qualify for a L-K-E. Suffice to say this probably doesn't qualify. The govt expects to be paid taxes on sales paid for in cash (or cash equivalents). Imagine someone who had bought bullion 50 years ago
for $50/oz. Today they use those coins to trade for say a MS65 Bust dollar worth $100K+. To suggest that there are no taxes due on this until the guy sells the bust dollar someday sounds absurd. And then if he trades the bust dollar for bullion 10 years down the road, he's probably gonna think taxes aren't due even if the bust dollar appreciated 100% in price.

roadrunner >>



Not in my state, nor most, especially those states that charge sales tax on bullion--it has already been taxed. I think you are confusing your CG taxes and sales taxes. Also, the scenario you gave above, with trading bullion for a Bust dollar, etc. People do the same thing with property all of the time.